By Nicole D. Prysby, J.D.
Class certification was granted for direct purchasers of the oral contraceptive Loestrin 24 against pharmaceutical companies for allegedly conspiring to delay generic competition through reverse-payment agreements.
A class of direct purchaser plaintiffs should be certified in a case against pharmaceutical companies for allegedly conspiring to delay generic competition through the use of so-called reverse-payment agreements, held the federal district court in Providence, Rhode Island. The plaintiffs relied heavily on the report from an expert, who constructed a hypothetical world in which defendants did not engage in any of the anticompetitive conduct alleged. The court found the expert’s model and analysis to be reliable. Rule 23(a) requirements are met, given the number of plaintiffs (47) and the fact that the expert’s model demonstrates that the defendants’ alleged unlawful conduct is the proximate cause of both the brand-only and generic-only purchasers’ alleged antitrust injury. The court also relied on the expert’s analysis to determine that Rule 23(b)(3) requirements are met; for example that the model demonstrates that each of the plaintiffs would have substituted some of their purchases of the brand drug for the cheaper generic, but for defendants’ allegedly unlawful generic suppression efforts (In re Loestrin 24 FE Antitrust Litigation, July 2, 2019, Smith, W.).
Warner Chilcott manufactures oral contraceptives under the brand name Loestrin 24. When Watson Pharmaceuticals, Inc. and Lupin Ltd., manufacturers of generic drugs, submitted applications to the U.S. Food and Drug Administration (FDA) for approval to sell generic versions of Loestrin 24, Warner filed suit asserting patent infringement. Warner subsequently entered into settlement agreements with the generic drug manufacturers to induce them to withdraw their patent challenges. Right before generic entry was set to occur, Warner Chilcott introduced a drug, Minastrin 24 (a chewable version of Loestrin 24), to erode the brand Loestrin 24 prescription base. This product hop allowed Warner Chilcott to retain branded sales (in Minastrin 24) once generic Loestrin 24 entered and state automatic-substitution laws kicked in.
Direct purchaser plaintiffs (DPPs) filed class action suits against the pharmaceutical companies and moved for class certification.
Expert analysis and class certification. Because the defendants executed the product hop and pulled brand Loestrin 24 from the market before automatic substitution laws could take hold, there is a lack of evidence reflecting how the market would have responded to generic entry in a but-for world. DPPs relied on an expert to construct a methodology for a hypothetical world in which defendants did not engage in any of the anticompetitive conduct alleged. The defendants argued that the expert’s methodology (for example, the use of aggregate damages calculations) made his analysis unreliable. But the court rejected their argument and concluded that the expert’s model is reliable and can be adjusted as needed following the liability phase of the litigation. For example, if a jury determines that generic-only or brand-only purchasers were not injured, the model allows for the exclusion of those class members from the aggregate damages calculation. Also his reliance on pre-launch forecasts of generic manufacturers does not render his damages analysis unreliable.
The court concluded that Rule 23(a) requirements were met. There are 47 potential class members. The court rejected the defendants’ argument that generic-only purchaser lack antitrust standing because they never directly purchased brand or generic Loestrin 24 and/or Minastrin from defendants during the class period. The court cited the DPP expert’s testimony, which demonstrated that the overcharges incurred by the generic-only purchasers were the result of defendants’ unlawful conduct aimed at suppressing generic competition. Therefore, the defendants’ alleged unlawful conduct is the proximate cause of the generic-only purchasers’ alleged antitrust injury. The court also rejected an argument that nine putative class members should not be treated as separate entities for purposes of numerosity because other members of their corporate families are also direct purchasers. The entities are separately incorporated companies and are thus distinct. The court rejected additional arguments against the plaintiffs’ expert’s methodology and analysis, and concluded that the requirements of commonality, typicality, and adequacy are met. Although the class representative is the only class member with an assignment, its status as a retailer with an assignment does not render its interest in pursuing these claims markedly different than other class members.
Rule 23(b)(3) requirements are also met. The DPPs’ common theory of injury is that every class member would have purchased at least some lower-priced generic Loestrin 24 instead of higher-priced branded Loestrin 24, Minastrin 24, or generic Loestrin 24 that it did buy. Their expert’s model is intended to demonstrate, using common evidence, that each of the DPPs would have substituted some of their purchases of brand Loestrin 24 or Minastrin for cheaper generic Loestrin 24, but for defendants’ allegedly unlawful generic suppression efforts. While questions remain for the jury (for example, the extent to which brand-only purchasers would have purchased generic Loestrin 24 in a market with generic competition), the expert’s theory is sufficient to show common proof of injury for class certification purposes. Similar logic applies to generic-only purchasers: while those purchasers may not have shifted to the cheapest generic available, the expert’s model demonstrates that they would have paid less for their purchases in a world with generic competition. Therefore, the DPPs have sufficiently shown that damages may be demonstrated by a common methodology. The court concluded that predominance is present, based on the DPP’s expert’s approach to class-wide damages. His methodology involves calculating class-wide averages (including those of actual prices paid, but-for generic penetration rates, but-for brand prices, and but-for generic prices) and plugging them into his aggregate overcharge model. The court held that that the DPP’s damages model need not offset its damages calculation with any anticipated decrease in volume that may have occurred in a but-for world due to changes in buying practices.
This case is No. 1:13-md-2472.
Attorneys: Donald A. Migliori (Motley Rice LLC) and Jeffrey M. Padwa (DarrowEverett LLP) for City of Providence. John A. Tarantino (Adler Pollock & Sheehan PC) and A. Lee Czocher (White & Case LLP) for Warner Chilcott Public Ltd. Co., Warner Chilcott Co., LLC and Warner Chilcott Holdings Co. III, Ltd.
Companies: Warner Chilcott Public Ltd. Co.; Warner Chilcott Co., LLC; Warner Chilcott Holdings Co. III, Ltd.
MainStory: TopStory Antitrust RhodeIslandNews
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